Donald Trump’s real art of the deal

Trump’s Castle casino on the Atlantic City Boardwalk

Last September I wrote a post speculating that Mitt Romney and Carly Fiorina may have been responsible for more human suffering than Donald Trump. I take that back. Based on what’s come out about Trump University and a New York Times report on Trump’s casino operations, I have to say that Trump’s business record was by far the worst of the three.

I assumed that Trump’s failures were honest business failures, such that most business owners and investors experience over the course of their careers. Since then I have learned better.

Basically Trump set up businesses with other people’s money that were so loaded with debt that they were doomed to fail. But he extracted a lot of money for himself before that happened. Here are highlights of what the New York Times reported:

His audacious personality and opulent properties brought attention — and countless players — to Atlantic City as it sought to overtake Las Vegas as the country’s gambling capital. But a close examination of regulatory reviews, court records and security filings by The New York Times leaves little doubt that Mr. Trump’s casino business was a protracted failure. Though he now says his casinos were overtaken by the same tidal wave that eventually slammed this seaside city’s gambling industry, in reality he was failing in Atlantic City long before Atlantic City itself was failing.

But even as his companies did poorly, Mr. Trump did well. He put up little of his own money, shifted personal debts to the casinos and collected millions of dollars in salary, bonuses and other payments. The burden of his failures fell on investors and others who had bet on his business acumen.

In three interviews with The Times since late April, Mr. Trump acknowledged in general terms that high debt and lagging revenues had plagued his casinos. He did not recall details about some issues, but did not question The Times’s findings. He repeatedly emphasized that what really mattered about his time in Atlantic City was that he had made a lot of money there.

[snip]

Mr. Trump assembled his casino empire by borrowing money at such high interest rates — after telling regulators he would not — that the businesses had almost no chance to succeed.

Donald Trump in 1990

His casino companies made four trips to bankruptcy court, each time persuading bondholders to accept less money rather than be wiped out. But the companies repeatedly added more expensive debt and returned to the court for protection from lenders.

After narrowly escaping financial ruin in the early 1990s by delaying payments on his debts, Mr. Trump avoided a second potential crisis by taking his casinos public and shifting the risk to stockholders.

And he never was able to draw in enough gamblers to support all of the borrowing. During a decade when other casinos here thrived, Mr. Trump’s lagged, posting huge losses year after year. Stock and bondholders lost more than $1.5 billion.

All the while, Mr. Trump received copious amounts for himself, with the help of a compliant board. In one instance, The Times found, Mr. Trump pulled more than $1 million from his failing public company, describing the transaction in securities filings in ways that may have been illegal, according to legal experts.

Mr. Trump now says that he left Atlantic City at the perfect time. The record, however, shows that he struggled to hang on to his casinos years after the city had peaked, and failed only because his investors no longer wanted him in a management role.

[snip]

Had Mr. Trump’s revenues grown at the rate of other Atlantic City casinos, his company could have made its interest payments and possibly registered a profit. But with sagging revenues and high costs, his casinos had too little money for renovations and improvements, which are vital for hotels to attract guests. The public company never logged a profitable year.

“There’s something not right when every single one of your projects doesn’t work out,” said Mr. Roffman, the casino analyst.

[snip]

In retrospect, David Hanlon, a veteran casino executive who ran Merv Griffin’s Atlantic City operations at the time of the Resorts battle, said, Mr. Trump succeeded in repeatedly convincing investors, bankers and Wall Street that “his name had real value.”

“They were so in love with him that they came back a second, third and fourth time,” Mr. Hanlon said. “They let him strip out assets. It was awful to watch. It was astonishing. I have to give Trump credit for using his celebrity time and time again.”

In 2014, the casino company filed for bankruptcy protection for the fifth time. The chief executive cited the debt level after the 2009 bankruptcy as the primary reason. For a time, Mr. Trump lent a glamorous sheen to the faded resort city. But some of his former investors no longer see the value.

“People underestimated Donald Trump’s ability to pillage the company,” said Sebastian Pignatello, a private investor who at one time held stock in the Trump casinos worth more than $500,000. “He drove these companies into bankruptcy by his mismanagement, the debt and his pillaging.”

This is worse than anything Mitt Romney’s Bain Capital did. And there is no reason to believe that Carly Fiorina was dishonest, only a bad manager of Hewlett-Packard.

Trump has no political record, so his fitness to hold high public office has to be judged by his business record. I think that, if elected, he would govern the nation in the same way that he has run his businesses. That is, his priority would be his power, his fame and his privileges.